Vol. 3,No. 3

W. Patrick Cantrell

W. Patrick Cantrell received his bachelor’s degree in accounting from Texas Tech University in Lubbock, Texas, and followed up with a law degree from the University of Houston’s Bates College of Law. He began his career by working for the Internal Revenue Service, and after only one year as a staff accountant at a private accounting ﬁrm, he founded Cantrell & Company, where he was managing partner for twenty-ﬁve years. In December 2000 his ﬁrm merged with Briggs & Veselka and they are still going strong.

From Federal Tax Procedure for Attorneys, Chapter 6

I. Introduction and Background

A. Prior to the 1998 IRS Restructuring Act, the IRS consisted of numerous functional “divisions,” the most important of which, from a tax practitioner’s viewpoint, are as follows:

Appeals,

Collection,

Criminal Investigation (CI), and

Examination (formerly Audit).

Presently the Collection function of the IRS is under the Small Business/Self-Employed Operating Division. Collection groups and examination groups are combined under “territory managers.”

B. In many cases a tax practitioner gets a tax case after the tax liability has already been determined. In most cases an assessment will have been made. Once an assessment has been made, the case is in the hands of the Collection function. At that point the practitioner is not concerned about either the Examination function or the Appeals function. Even if the assessment is the result of an audit, the Examination personnel will no longer have the ﬁles, and contact with them is pointless. At this juncture, then, the practitioner needs to know and understand the Collection operations, such as the Automated Collection System (ACS) and the Special Procedures Function (SPF). A working knowledge of the Taxpayer Advocate Service is also important.

C. The primary functions of the Collection personnel are as follows:

To collect unpaid federal taxes that have been assessed;

To solicit unﬁled tax returns that are due; and

To investigate and make recommendations in “trust fund liability” (formerly known as 100% penalty”)1 cases.

II. TDAs versus TDIs

TDAs are cases where a taxpayer has ﬁled a return, but has not paid the tax; TDIs are cases where a taxpayer simply has not ﬁled a required return.

B. In a TDI case, where a taxpayer refuses to ﬁle a return (either income tax or employment tax), ROs are empowered to ﬁle a return for him or her. This authority is contained in I.R.C. § 6020(b). Note that if the IRS executes a return under § 6020(b), the statute of limitations (for assessment purposes) does not start to run.2

Practice Tip

If an RO requests that a delinquent return be ﬁled, send it to the IRS service center and give a copy to the RO. This prevents mishandling by the RO.

C. It is important to remember that ROs know little, if anything, of substantive tax law. They are trained in neither tax law nor accounting. Consequently, they cannot generally read or interpret the substantive aspects of a tax return. Therefore, in TDI cases, it does not really matter much how accurate the return is; it only matters that the return gets ﬁled.

III. Revenue Ofﬁcers

A. Titles

Field collection employees are known as ROs. Do not confuse them with revenue “agents.” Agents are IRS Examination employees. ROs, on the other hand, are generally not trained in accounting, and do not necessarily have a college degree.

B. Powers

ROs have a difﬁcult and unpleasant job, dealing with delinquent and often recalcitrant taxpayers. But Congress has given them broad, sweeping powers to do their job effectively, including the power to ﬁle liens and to levy on wages and other property.

C. RO Perspectives

Revenue agents (RAs) have a totally different perspective than ROs. As a practical matter, RAs could not care less whether the tax ever gets paid; they are concerned only with the accuracy of the returns. On the other hand, ROs could not care less about the accuracy of the return; they care only about the tax being paid.

D. Challenging RO Aggression

If an RO appears to be taking an overly aggressive position, the taxpayer should consider requesting a review of these actions by his or her group manager. There is a certain risk in making this request, however, since the group manager usually sides with the RO, and the request for review may not be welcomed by the RO. In challenging an RO’s actions, one should keep in mind the ofﬁcial chain of command. The chain of command within each district, from bottom to top, is (1) revenue ofﬁcer, (2) group manager, (3) territory manager, and (4) area director.

E. Oral Statements Made by ROs

Verbal representations made by ROs (or any IRS employee, for that matter) may not be relied on by taxpayers or representatives.3 Such statements are useless.

Practice Tip

On critical matters, always try to get revenue ofﬁcers to commit in writing where possible.

F. Due to the broad, sweeping powers of ROs to seize property, it is important to treat IRS Collection cases with a great deal of delicacy.

IV. Automated Collection System

A. Smaller and more routine IRS Collection matters are often assigned to the ACS.

B. ACS employees do not make ﬁeld visits. Instead, they operate exclusively by making telephone contacts with delinquent taxpayers. Each ACS employee has a computer terminal and can access any taxpayer’s account simply by entering a Social Security number. ACS has access to levy source information and has the power to issue liens and levies in appropriate cases.

C. In smaller cases, ACS has the power to take ﬁnancial information over the telephone and work out installment agreements.

V. Financial Statements

A. Revenue ofﬁcers will in virtually all cases request that a taxpayer ﬁll out and sign a Form 433-A. This is a very detailed form requiring disclosure of all assets and liabilities as well as a listing of monthly income and living expenses. If the taxpayer has a business (usually a proprietorship— Schedule C), the IRS will also request that he or she ﬁll out a Form 433-B.

B. The purpose of the monthly income and living expense analysis is to indicate a taxpayer’s ability to pay a monthly amount to the IRS. For this purpose, ROs will not allow certain expenses. For example, they will not allow the cost of vacations, entertainment, gifts, private school tuition, boat payments, eating out, etc.

C. The danger of submitting a ﬁnancial statement is that this document provides a road map of levy sources that the IRS can immediately attach if they want to. The only problem with not providing a ﬁnancial statement is that the IRS will not enter into a part-payment agreement with- out it.

VI. Special Procedures Function

A. The Special Procedures (as it was formerly known) Staff is now a part of the Technical Compliance Function, and deals with the following specialized matters:

Applications for certiﬁcates of discharge, subordination, or nonattachment;

VII. Miscellaneous

A. Payment Extension

The IRS also has statutory authority to extend the time for payment of income tax for a period of up to six months. This will only be done in cases of “undue hardship.”4 An application for an extension is made on Form 1127 and must be accompanied by evidence of hardship and complete ﬁnancial information.5

B. Zip Code Designation

Revenue ofﬁcer (RO) groups in IRS local ofﬁces are generally assigned cases based solely on postal zip codes. They go by the zip code as reﬂected on the tax return ﬁled by the taxpayer.

C. Internal Revenue Manual

The collection part (Part 5) of the Internal Revenue Manual (IRM) consists of the following:

Description

Chapter

General Collecting Procedures

5.1

Reports

5.2

Entity Case Management Systems

5.3

Case Processing

5.4

Insolvencies, Decedents Estates, Estate Taxes

5.5

Collateral Agreements

5.6

Trust Fund Compliance

5.7

Offer in Compromise

5.8

Bankruptcy

5.9

Seizure and Sale

5.10

Notice of Levy

5.11

Federal Tax Liens

5.12

Collection Quality Measurement

5.13

Installment Agreements

5.14

Financial Analysis

5.15

Currently Not Collectible

5.16

Legal Reference Guide for Revenue Ofﬁcers

5.17

Liability Determinations

5.18

Liability Collection

5.19

Abusive Tax Avoidance Transactions

5.20

D. Ofﬁcer of the Day (OD)

In each RO group, there is designated each day what is called an “ofﬁcer of the day.” The OD is present to handle walk-in taxpayers. That is, any taxpayer with a collection problem can walk into any IRS ofﬁce and demand to see the OD, and he or she will be granted an interview.

E. Bankruptcy Options

When the administrative avenues for resolution have been exhausted, the taxpayer should begin to consider ﬁling a bankruptcy petition. Bankruptcy is the taxpayer’s “ace in the hole.” The effects of bankruptcy on the collection of tax are well-known to the RO and, in some circumstances, may provide some additional leverage in the negotiation of an administrative resolution.

F. Form 53

When the RO becomes convinced that the taxpayer has no collectible assets and no future source of collection, the RO closes the case by completing Form 53, Report of Currently Not Collectible Taxes. This action (commonly called to “53 the account”) removes the case from the RO’s inventory. Thereafter, the case remains closed as long as the taxpayer’s income stays below certain limits.

G. Transcript of Account

If there is any question about the proper amount of an assessment or the proper application of any payments or credits, then one should order a transcript of account. A taxpayer is entitled to this document as a matter of law.6 The IRS must furnish it to a taxpayer free of charge. To order it, one can telephone or send a fax request to the IRS’s Practitioner Priority Service:

Telephone: 866–860–4259

Fax: 901–546–4400

H. Fair Tax Collection Practices7

In its collection of federal taxes, the IRS may not use certain unfair tactics. They must observe the following rules:

The IRS may not contact a taxpayer at an unusual or inconvenient time or place.

The IRS may not contact a taxpayer (in person or by telephone) who has an authorized representative.

The IRS may not contact a taxpayer at his or her place of work.

The IRS may not contact a taxpayer before 8:00 a.m. or after 9:00 p.m.

The IRS may not use threats, abusive language, or repeated calls with an intent to annoy the taxpayer.

Collection Enforcement: Federal Tax Liens

I. Background and General Rules

A. Introduction

The federal tax lien (FTL) is the backbone of the federal tax collection process. The ﬁling of a “notice of federal tax lien” (NFTL) can have a devastating effect on a taxpayer. Since it is a matter of public record, it is quickly picked up by title companies and credit-reporting services. Accordingly, a taxpayer’s credit status is adversely affected, and he or she will usually be unable to obtain loans until the lien is somehow released. Further- more, the taxpayer will be unable to obtain a mortgage on real estate purchases. In addition, a taxpayer with a tax lien against him or her also will be unable to sell real estate in the county in which a lien is recorded. The reason is that a title company will refuse to issue a title policy until the lien (as a “cloud on the title”) is removed or otherwise satisﬁed.

B. Deﬁnitions

Webster’s deﬁnition of a lien is as follows: “a charge upon real or personal property for the satisfaction of some debt or duty ordinarily arising by operation of law; the security interest created by a mortgage.” The word “lien” is a generic term and, standing alone, includes liens acquired by contract or by operation of law.

C. General Rule

If any taxpayer refuses to pay tax owed to the Internal Revenue Service (IRS) (assuming demand for payment has been made), the amount of the unpaid tax (together with statutory interest and any assessable penal- ties) constitutes a lien in favor of the IRS upon all property or rights to property belonging to the taxpayer.1

D. Period of Lien Existence

A federal tax lien arises at the time an assessment is made and continues in force until the tax liability is satisﬁed (i.e., paid) or becomes unenforceable by reason of lapse of time.2 If there has been no assessment, there obviously can be no lien. The lifetime of a lien is the period of time that the IRS is allowed to collect the tax by levy. This period is ten years pursuant to I.R.C. § 6502(a)(1).

E. Notice

1. General Notice Rule

Until the notice of federal tax lien has been properly ﬁled, the lien is not perfected against bona ﬁde purchasers and certain classes of creditors.

2. “First-in-Time-First-in-Right” Rule

This is also known as the “race to the courthouse” rule. Although the general rule is that the ﬁrst secured lien in time has priority, there are exceptions regarding FTLs. For example, if a third-party creditor gets a judgment against a taxpayer but does not record (“abstract”) it before the NFTL is ﬁled, then the IRS lien will prevail. Conversely, if the IRS does not perfect its lien prior to a perfected third-party lien, it will not prevail in a contest regarding conﬂicting liens.3

If a delinquent taxpayer’s property is transferred prior to the ﬁling of the NFTL, then the FTL will not attach to the property even if the transfer is fraudulent and even if the ultimate purchaser of the property has knowledge of the lien.4

3. “Super Priority” Liens

There are ten exceptions to this rule that are contained in the statute.5 These are referred to as super priority interests, which have priority over an FTL regardless of when the FTL was created or perfected. The IRS even recognizes an eleventh category to include purchase money security interests.6 Also, purchasers of automobiles are protected against prior FTLs of the seller if they had no notice thereof.7

4. Notice and Demand

Unless a “notice and demand” for unpaid tax is mailed to the tax- payer or left at his or her home, a subsequent FTL is rendered invalid.8 An NFTL can cover more than one tax period. It will specify each period and the amount of tax owed for each period.9

F. The seven principal aspects of the FTL are as follows:

Creation;

Attachment;

Perfection;

Priority;

Relief from lien;

Duration; and

Enforcement.

G. Judgment

There is no requirement that the IRS obtain a judgment against the tax- payer prior to getting a lien; yet, the FTL gives the IRS more power than that given to a judgment lien creditor.

II. Lien Litigation

A. Necessary Parties

If suit is ﬁled by the IRS to enforce an FTL, all persons having liens or claiming an interest in the property must be made parties to the suit.10

B. Order of Sale

If suit is brought under § 7403, the federal district court determines the merits of all claims and may order a sale of the property and distribution of the proceeds.11

C. Intervention in Third-Party Suits

If the IRS is not a party to a civil action by a third party, it may nevertheless intervene in such suit to assert its lien.12

D. Judicial and Other Sales

If there is a judicial sale of property in a civil lawsuit and the IRS has a lien on such property, any such sale is subject to the FTL as long as no- tice of the IRS lien was ﬁled prior to the date the lawsuit was com- menced.13 The Fifth Circuit has ruled that a levy by the IRS on property sold at a sheriff’s sale was valid even though the IRS held a junior lien on the property. All other liens on the property were discharged by the sheriff’s sale; however, because the IRS had not been given proper no- tice of the sale as required under I.R.C. § 7425(b), the tax lien followed the property into the hands of the third-party purchaser. The third party’s reliance on the county records was held not to be proper.14

Nonjudicial sales of property are governed by I.R.C. §§ 7425(b)–(d). In general, these provisions are sufﬁcient to defeat an IRS lien that is in a junior position as long as proper notice of sale is given by the taxpayer.

E. Injunction Suits

Suit may be brought against the IRS to remove an FTL as a cloud on the title to realty, but only if such suit is not brought to enjoin the collection of a tax (see I.R.C. § 7421).15

III. Attachment Rules

A. General Rules

An FTL is considered to arise and “attach” to the taxpayer’s property as of the date of the tax assessment. The date of assessment can be determined by inspecting one of three documents:

The taxpayer’s transcript of account;

The certiﬁcate of assessment; or

The notice of federal tax lien, Form 668(Y).

An FTL attachment cannot be effective, however, until three things have happened:

The tax has been assessed;

The IRS has demanded payment (which demand must occur

within sixty days of assessment); and

The taxpayer has failed to make payment after such demand.

B. Nonattachment

If the IRS determines that, because of confusion of names or otherwise,

any person (other than the taxpayer) may be injured by the appearance that a notice of lien refers to such person, the IRS may issue a certiﬁcate of nonattachment.16 An application for a certiﬁcate of nonattachment can be submitted to the local IRS Collection ofﬁce.17

C. After-Acquired Property

Anything acquired by the taxpayer after the lien arises is immediately attached by the lien. On the other hand, property transferred prior to assessment of the tax and attachment of the lien (e.g., property divided pursuant to a divorce decree) is not subject to the lien.

D. The “Secret” Lien

When the federal tax lien ﬁrst attaches, it is sometimes referred to as the “secret lien” because the lien is not yet of public record. The lien is said to “attach” because it acts as an encumbrance on the taxpayer’s property. The secret lien takes priority over any interest of the taxpayer in the property and over the interests of certain other persons even though they may be completely unaware of the existence of the lien.

IV. Enforcement

A. General Rule

The FTL is an encumbrance on property. The lien itself, however, does not result in the direct collection of any amount. Rather, the following devices are provided to enforce the FTL:

Administrative levies and

Judicial remedies.

B. Levies and Litigation

The way an FTL is normally enforced is by means of a levy (see I.R.C. § 6331 et seq). Although levies are beyond the scope of this subchapter, generally they mean seizure and distraint of a taxpayer’s property. However, there is an alternate enforcement mechanism. The IRS can ask the Justice Department to ﬁle a civil action in U.S. District Court to enforce a lien and subject any of the taxpayer’s property to the payment of delinquent tax.18

C. Injunctions

A U.S. Federal District Court has jurisdiction to grant, in appropriate cases, an injunction against the IRS from enforcing an FTL.19

V. Estate or Gift Tax Liens

A. Deferred Estate Tax Payments

In the case of an estate consisting largely of an interest in a closely held business, the executor can elect to pay out the estate tax in deferred installments over an extended period of time.20 If this occurs, a special lien arises in favor of the IRS with respect to the “§ 6166 property.”21

B. Estate Considerations

Unless estate tax is paid (or becomes unenforceable), it is a lien upon the gross estate for ten years following death.22 Where estate property has been specially valued under I.R.C. § 2032A, the tax difference resulting from such special valuation constitutes a tax lien for the ten years after death speciﬁed in I.R.C. § 2032A(c).23

VI. Deﬁnition of Property and Property Rights

A. General Rules, and Applicability of State Law

I.R.C. § 6321 refers to “property” or “rights to property.” Unfortunately, the term “property” is nowhere deﬁned in the Internal Revenue Code. Thus the term “property” draws its content from state law; how- ever, even though the deﬁnition of property is left to state law, the con- sequences that attach to those interests are a matter of federal law. For example, the IRS can enforce its lien and foreclose on a Texas community homestead even though one of the spouses is clearly not liable for the tax.24

B. Intangibles

The FTL clearly attaches to general intangibles such as accounts receivable, licenses, and franchises. (Note that the Uniform Commercial Code recognizes the value of intangibles as “property rights.”)

C. Pension Plan Beneﬁts

Pension plan beneﬁts payable to the taxpayer (including IRAs) are subject to attachment by the FTL even if such payments are exempt from attachment by judgment creditors under state law.

D. Trusts

The interest of a taxpayer in a trust is subject to the force of a tax lien.25

E. Inherited Property

If a taxpayer inherits property at a time when he or she has an out- standing federal tax liability, whether a lien immediately attaches de- pends entirely on state law. For example, if a taxpayer in Arizona exercises his or her state statutory right to renounce or disclaim the in- heritance in favor of third parties, the IRS cannot thereafter attach his or her interest in the estate.26 But in an Arkansas case, the U.S. Supreme Court has held that a federal tax lien attached to a delinquent taxpayer’s interest in an estate, despite his disclaimer. The reason was that, under Arkansas law, the interest had pecuniary value and was immediately transferable at the time the estate was created.27

VII. Release and Relief Measures

A. Release

Within thirty days after the tax (including interest) has been paid, or the liability has become legally unenforceable, the IRS is required to issue a certiﬁcate of lien release.28 The NFTL (Form 668(Y)) has printed language that operates as an automatic lien release as of the “last date for reﬁling.” That is, pursuant to the language on this form, the FTL is “self-releasing.” If credit-reporting agencies, lenders, or title companies refuse to accept this language as a certiﬁcate of re- lease, it may be necessary to secure from the IRS a Form 668(Z) release certiﬁcate. This issue normally arises when the liability becomes un- enforceable due to the expiration of the ten-year collection statute of limitations. Lien releases are currently handled out of a central location in Cincinnati, Ohio.

B. Subordination

1. General Statutory Rule

The IRS may issue a lien subordination certiﬁcate if one of three circumstances exists:

a. The amount of the lien is fully paid;

b. The taxpayer is able to convince the IRS that the amount realizable from the property to which the certiﬁcate relates will ultimately be increased by issuing the certiﬁcate, thus facilitating the ultimate collection of the tax; or

c. The IRS believes that the government will be adequately se-cured after the subordination.29

2. Mortgage Example

If an NTFL is ﬁled and a delinquent taxpayer secures a mortgage loan on property subject to the lien and pays over the proceeds of the loan to the IRS, a certiﬁcate of subordination can be issued to put the mortgagee’s security interest ahead of the IRS.30 Other examples are in the regulations as well.

3. Procedure

Complete instructions for ﬁling an application for a certiﬁcate of subordination are contained in the two-page Publication 784. There is no speciﬁc form for submitting the application. All you have to do is make sure that all the required information is submitted.31 In the author’s experience, it is very difﬁcult to convince a revenue ofﬁcer to issue a certiﬁcate of subordination, even in the face of compelling reasons.

4. Form of Certiﬁcate

If the application is approved, the IRS will issue the certiﬁcate as Form 669-D.

C. Judicial Relief

If the IRS knowingly or by reason of negligence fails to release a lien under § 6325, a taxpayer may bring a civil suit for damages against the IRS.

D. Appeal

Any person may appeal to the IRS local ofﬁce for a release of a lien if there has been an error in the ﬁling of an NFTL. This appeal is made to the Special Procedures Section of the IRS.32

E. Lien Withdrawals

The IRS has the authority to withdraw NFTLs under certain circumstances.33 The NFTL may be withdrawn if the IRS determines that

the ﬁling of the NFTL was premature or not in accordance with IRS administrative procedures;

the taxpayer entered into an installment agreement under I.R.C. § 6159 to satisfy the tax liability for which the lien was imposed, un- less such agreement provides otherwise;

the withdrawal will facilitate the collection of the tax liability; or

with the consent of the taxpayer or the National Taxpayer Advocate (NTA), the withdrawal would be in the best interests of the taxpayer and the government, as determined by the NTA.34

There is an important distinction between “releasing” a federal tax lien and “withdrawing” a ﬁled notice of that lien. A lien release not only extinguishes the lien itself but also automatically extinguishes the underlying tax liability. A withdrawal, on the other hand, only withdraws public notice of the lien.35

All requests for withdrawal of the NFTL must be in writing and must contain the following:

The taxpayer’s name;

Current address;

The taxpayer’s identiﬁcation number;

A copy of the NFTL affecting the property, if available; and

A statement or basis for the withdrawal request.

A request for withdrawal may be sent to the revenue ofﬁcer assigned to the account, the IRS Technical Support Group, or the National Tax- payer Advocate, whichever applies.

If the taxpayer is fortunate enough to convince the IRS to with- draw its lien, upon the request of the taxpayer, the IRS is required to make reasonable efforts to notify the credit-reporting agencies and creditors speciﬁed in the request.36

Practice Tip

As a practical matter, it is unlikely that the IRS will withdraw its notice of lien absent extraordinary circumstances.

F. Collection Due Process (CDP) Hearing

When an NFTL has been ﬁled under § 6323, the IRS must hand-deliver or send by certiﬁed mail to the taxpayer a notiﬁcation of such ﬁling. This notice must be delivered within ﬁve days of the ﬁling date. Included with the notice must be an explanation of the taxpayer’s right to have an impartial hearing with the IRS’s Appeals Ofﬁce.37 If there are irregularities or mistakes in the ﬁling of the lien, it is an excellent idea to ask for a CDP hearing.38 Details of the CDP process are contained in chapter 2.

VIII. Miscellaneous

A. Notice

The lien imposed by I.R.C. § 6321 is not effective as against any other security interest holder until “notice”39 has been duly ﬁled by the IRS.40

B. Bona Fide Purchasers

Even though the IRS may have ﬁled a lien notice, it may not be effective as against a good faith, bona ﬁde purchaser of certain property.41

C. Place of Filing

In the case of real property, notice of a tax lien is required to be ﬁled in the county courthouse in the county in which such realty is located.42 State law may not require the IRS to “acknowledge” an FTL. The only function of state law is to designate a place for ﬁling the lien notice.43

D. Reﬁling

The running of the ten-year collection period may, in some circumstances, be suspended. For example, if the taxpayer is out of the country44 or has agreed in writing to extend the collection period, the ten-year statutory period may be considerably longer. In such cases, it is necessary for the IRS to reﬁle its NFTL to maintain the continuity of its lien priority as against third-party creditors. The government has eleven years plus thirty days after assessment within which to reﬁle its NFTL.45

E. Marital Issues

Funds owned by a wife prior to marriage and maintained separately are not subject to a lien attributable to the husband and his former spouse’s tax liability.46 Similarly, in a non–community property state (Wisconsin), a tax lien against a husband for a liability arising prior to marriage cannot be enforced against separate property owned by the wife.47 For purposes of these rules, the sex of the spouse is irrelevant.

F. Bankruptcy Issues

IRS Collection Division employees are cautioned to make prompt lien- ﬁling determinations, particularly where a taxpayer is perceived to be in ﬁnancial distress. However, if a bankruptcy petition has been ﬁled, a notice of tax lien cannot be ﬁled without the consent of chief counsel.48

Liens can attach to property exempt from inclusion in the bankruptcy estate, including the homestead exemption.49 To acquire this status, a lien must be secured by the proper ﬁling of an NFTL prior to the commencement of the bankruptcy.50 The amount of a secured tax lien in bankruptcy is limited to the unencumbered property’s equity, with the balance of the obligation reduced to unsecured status.

A discharge in bankruptcy prevents the IRS from taking any action to collect tax as a personal liability of the debtor. However, property possessed at the time of the ﬁling of the petition remains subject to the tax lien. Thus, while in personam liability may be discharged, in rem liability remains enforceable for purposes of I.R.C. § 6325.

In negotiating a lien buyout in the postdischarge period, look care- fully at the copies of the recorded liens. If they are for real estate only, then they will not attach to nonrealty assets such as pension funds.

F. Statute of Limitations

The ﬁling of the NFTL has no effect on the expiration of the ten-year collection statute of limitations as provided in I.R.C. § 6502.

G. The following forms are pertinent to FTLs:

Notice of Federal Tax Lien (Form 668(Y))

Certiﬁcate of Release of Federal Tax Lien (Form 668(Z))

Certiﬁcate of Discharge of Property from FTL under I.R.C. § 6325(b)(1) (Form 669-A)

Certiﬁcate of Discharge of Property from FTL under IRC § 6325(b)(2)(A) (Form 669-B)

Certiﬁcate of Discharge of Property from FTL (Form 669-C)

Certiﬁcate of Subordination (Form 669-D, E, or F)

H. Nominee Liens

Unfortunately, some delinquent taxpayers have attempted to place their property beyond the reach of government collections by putting it in the name of someone else, typically a relative or “alter ego” entity such as a trust or controlled corporation. Whenever this occurs, the IRS will generally place what is known as a “nominee lien” against the property in question. Nominee liens are judicial in origin, as they are mentioned nowhere in the I.R.C. These nominee liens have been held to be valid in a variety of different circumstances.51

26. In Mapes v. United States, 15 F.3d 138 (9th Cir. 1994), the IRS lost the case in an at- tempt to attach an Arizona taxpayer’s interest in his mother’s estate following the tax- payer’s renunciation in favor of his children; see also a similar result in a Texas case, Leggett v. United States, 97-2 USTC ¶ 50,635 (5th Cir. 1997).